AI Demand Holds Up Singapore Manufacturing; Chemicals the Sole Decline

What the data says

Singapore's Economic Development Board (EDB) released its preliminary manufacturing data for August on Monday 28 September. Overall output rose 15.4 per cent year on year — clearly faster than July's revised 6.9 per cent, but below market expectations. 1. The headline: growth picked up, but missed forecasts Overall manufacturing output grew 15.4 per cent year on year in August, the strongest in three months and above June's 7.6 per cent and July's 6.9 per cent. Excluding the volatile biomedical manufacturing cluster, output rose 17 per cent, extending July's 8.2 per cent increase. On a seasonally adjusted monthly basis, output slipped 0.5 per cent in August, reversing July's 2.3 per cent gain; excluding biomedical manufacturing it rose 5.8 per cent. Growth accelerated, but still came in below expectations. 2. Precision engineering and electronics led Precision engineering posted the largest jump, up 33.9 per cent year on year (against 18 per cent in July). EDB attributed this mainly to higher production of semiconductor equipment in the machinery and systems segment; the precision modules and components segment also rose on higher output of dies, moulds, tools and jigs, and of precision components for the electronics industry. The linchpin electronics cluster grew 28.5 per cent, extending July's 11.1 per cent gain, supported by strong production of servers and related products, semiconductors and data storage products amid artificial-intelligence-related demand. Within the cluster, semiconductors rose 26.1 per cent, infocomms and consumer electronics 66.3 per cent, and computer peripherals and data storage 20.4 per cent; other electronic modules and components fell 6 per cent. 3. Chemicals was the only contracting cluster Chemicals output fell 12.7 per cent, extending July's 10.5 per cent decline. EDB said petroleum output was affected by plant maintenance, while petrochemicals remained constrained by softer demand and feedstock supply disruptions. The specialties segment, however, grew on higher production of industrial gases and food additives. 4. The remaining clusters Transport engineering grew 9.5 per cent, general manufacturing industries 1.5 per cent and biomedical manufacturing 0.4 per cent. Every cluster except chemicals recorded year-on-year growth. 5. Where the momentum comes from AI hardware is the main propellant. Global semiconductor sales jumped in July, reflecting firm demand from AI-related and data-centre investment; stronger demand for semiconductors and electronic components has also lifted exports across Asia. Some analysts expect the manufacturing momentum to carry into the fourth quarter, led again by electronics and precision engineering. 6. Our view First, this growth is narrow-based. The pull comes from electronics and precision engineering while chemicals remains a drag — reading the 15.4 per cent headline alone overstates how broadly the recovery has spread. Second, for companies trading between China and South-East Asia, the opportunity sits in semiconductor equipment, electronic components and the related supply chain, not in every category moving up together. Sourcing and inventory decisions should follow that structure. Third, one month is not a trend. Two things are worth tracking: whether chemicals stops falling, and whether the warmth spreads beyond electronics into more industries. Sources: Economic Development Board (EDB) preliminary data, 28 September 2026; The Business Times, "Factory output accelerates to 15.4% in August, undershooting estimates"; The Straits Times, "Singapore factory output jumps in August, driven by sustained AI demand"; Lianhe Zaobao, 28 September 2026. Compiled by Singapore Global International; facts and figures are from the sources above, while commentary and views are our own. Original: https://businesstimes.com.sg/singapore/factory-output-accelerates-15-4-august-undershooting-estimates